A Tax Reform to Restore America's Prosperity

'First, I will make an across-the-board, 20% reduction in marginal individual income tax rates.'

By

Mitt Romney

February 23, 2012

When generations of immigrants looked up and saw the Statue of Liberty for the first time, they surely had many questions and doubts about the life before them. Yet one thing they knew without a doubt—in America anything was possible, and their children would have a better life.

That deep confidence in a better tomorrow is the basic promise of America. Today that promise is threatened by a faltering economy and a lack of presidential leadership.

We have record-breaking unemployment and deficit spending, and a tax code that looks like it was devised by our worst enemy to tie us in knots. These three afflictions are interconnected. I have a plan to address them and achieve three goals: more jobs, less debt, and smaller government.

My plan is conservative in a way that stands out not only from President Obama's failed approach of higher taxes and runaway deficit spending, but also from the say-anything-to-get-elected fiscal recklessness of some of my Republican rivals. Offering gimmicky proposals that rely on implausible levels of economic growth and blow huge holes in the budget is easy. Fixing our very serious problems is not.

I am prepared to make the difficult decisions our nation needs. I favor deep cuts in federal spending, and I've previously outlined exactly where I would cut and how I would reform entitlements to strengthen them for future generations. But we can't look at spending in isolation.

I believe we must make the tax code simpler and fairer. We must reduce tax rates for job creators to promote economic growth. And we must still raise enough revenue to stop the endless borrowing that threatens American prosperity.

First, I will make an across-the-board, 20% reduction in marginal individual income tax rates. This bold stroke reduces the tax on the next dollar of income earned by all taxpayers. It also reduces tax rates for the many businesses that pay at individual rates and employ the majority of private-sector American workers, thus driving significant increases in hiring and wages.

Second, I will reduce the corporate tax rate to 25% from 35%, transition from a world-wide taxation system to a territorial one, and make the R&D tax credit permanent. These steps will unleash significant domestic investment, attract more foreign investment, and make the U.S. economy competitive with others around the globe. They will not only spur significant job creation, but also raise wages for American workers.

Third, I will promote savings and investment by maintaining the low 15% rate on capital gains, interest and qualified dividends, and eliminate the tax entirely for those with annual income below $200,000. These low tax rates will create powerful incentives for Americans to save and invest, while encouraging business investment and economic growth.

Fourth, I will take long overdue steps to correct failures in the tax code. I will abolish the death tax, whose primary effect today is to foster elaborate schemes for transferring wealth. I will also repeal the Alternative Minimum Tax, which was intended to make the code simpler and fairer but has accomplished precisely the opposite.

Fifth, I will bring stability to the tax code by making these changes permanent. People and businesses should not live in perpetual uncertainty, waiting to see what changes the annual partisan battles in Washington will make to what they owe. One recent study estimated that simply returning policy certainty to pre-Obama levels could create 2.5 million jobs in less than two years.

Stronger economic growth and reductions in spending will help to ensure that these tax cuts do not expand deficits. In addition, I will place some curbs on personal tax deductions, exemptions and credits, and I will also broaden the corporate tax base.

Higher-income Americans who receive the greatest benefit from rate cuts will see the most significant limits. Middle-income Americans will continue to enjoy tax benefits that favor important priorities such as home ownership, charitable giving, health care, and savings. The result will be a pro-growth tax code that still raises the necessary revenue, retains the existing progressivity, and ensures that middle-income Americans will see real tax relief.

More jobs, less debt, smaller government. That is the goal America must reach if we are to restore its promise. Getting there requires that we replace President Obama, who has gone in the opposite direction with a stagnant economy, trillion-dollar deficits, and a proposal for the largest tax increase in history. But let's not replace the president's profligacy with pie-in-the-sky proposals that saddle future generations of Americans with heavy burdens.

The plan I am proposing is far-reaching yet realistic. It will bring us a federal government that does what it needs to, that lives within its means, and that uses pro-growth tax policy to raise necessary funds and not a dollar more.

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